Since the Paycheck Fairness Act of 2012 is getting a cloture vote in the Senate today, I thought I’d start a conversation about worker compensation. It used to be understood that most households could get by on one paycheck and that the father was the one presumed to be responsible for that income. If a woman was working, it was kind of assumed that her income was supplemental. These presumptions justified overt pay discrimination against women. The men literally needed the money more than the women. As society changed, the old presumptions went from being presumptuous to being offensive on their face. If people still make arguments in favor of wage discrimination, they use other rationales, like the fact that women are more likely to leave the workplace for maternity leave or to care for a parent. Most people would say that that is irrelevant and you shouldn’t treat a woman differently from a man just because she might have a baby or she might be more likely to leave the job to look after her family.
In any case, let’s try a thought experiment. A company has two entry-level job openings. They decide to fill the jobs with two Stanford graduates, one a man and the other a woman. They have identical degrees and totally equivalent work experience. They will be doing the exact same job for the company. Now, let’s say that company has a pay range for these openings. They’ve budgeted a minimum of $50,000/year and a maximum of $70,000/year. The man asks for something closer to the maximum, say $65,000. The woman asks for something closer to the minimum, say $55,000. Does the company have an obligation to ignore their requests and give them both the same starting salary?
What if it proves to be the case that women are statistically less successful in salary negotiations than men? How do you actually conclude that it’s the women’s fault and not a bias on the part of the people who do the hiring? Could they just be less willing to make concessions to women? I’ve seen studies that showed that both women and blacks wind up paying more for cars than men and white men, respectively. This was in part because car dealers made higher initial offers to women and blacks, and drove a harder bargain with them. But it was also partly because women and blacks were less willing to haggle. There’s a bit of a chicken and egg problem with sorting that all out. But one way to solve it is to eliminate the haggling. The car has one price, and so does the job.
Are there good reasons to make pay negotiable? Or should job postings come with firm salaries attached to them? I think it would be hard to do that because a job might be available to people with widely different work experience. A company might not want to limit the applicant pool to recent college grads, and might be willing to pay more for the right person who has some experience.
Anyway, what are your experiences in the workplace, and what do you think should be done, if anything, to address wage disparities and gender discrimination?
I’ve worked at jobs where I am sure unions were the way to go. The treatment of low wage workers is usually bad.
A company can state that for a certain amount of experience, the pay is a certain amount.
Companies don’t train like they used to. That cuts down on the type of applicants they will hire.
You would have to know what is what at a company before negotiating. You could get burned on the amount of salary.
I’ve read two interesting takes on how to deal with compensation in a “fair” way. The first is Joel Spolsky’s. At his company they setup a collection of levels and pay is based on your level. Changes in pay are done to the entire level.
The other interesting one I’ve read about is how it’s done a Valve. They posted their Employee Handbook [PDF] online and made it publicly available (the whole thing is fascinating… but do a search for “compensation” if that’s all you want to read about). Their system is a bit more complicated but is based on a combination of metrics that they combine into a “stack ranking”. This probably works out to be kind of like the levels in Joel Spolsky’s system but there might be a bit more movement depending on how the peer reviews and such went in any particular cycle.
For me personally it’s a tough problem. How do you make sure that people are getting compensated fairly and that some people don’t get the perception that they are being compensated poorly relative to other workers in the company who they perceive as being at a similar or lower level of value than they are is a really nasty problem. I’ve never worked somewhere with a strategy like the ones above but I can’t imagine it’s any worse than the situation where nobody knows how they rate relative to anyone else. But I have felt like I wasn’t being compensated fairly.
It’s a very interesting question.
Anyway, what are your experiences in the workplace…
Well, I try to talk to chicks at the office, but no matter how much I compliment them on their appearance, they’re all, like, “I’ve got to get back to work.”
What’s up with that?
I’ve always been a believer in equal pay for equal work.
the way to get that is to keep fighting for bills like the Paycheck Fairness Act, and to defeat Republicans in elections, since they’re the ones who tend to obstruct this kind of progress.
I guess the “equal pay for equal work” thing sounds obvious in the abstract but it gets pretty tough in the particular.
I mean, don’t we all know idiots who don’t do anything at work but keep getting promoted or keep getting the same raises as the people who work their butts off? There’s too little performance pay, not too little.
We still have Old Boy’s Clubs where the guys protect each other, which introduces systemic bias into performance pay. So, how are you going to legislate this stuff?
I mean, I can see fixing it at the beginning with new hires. But over time those new hires have different levels of performance that should be rewarded or punished on their own merits. Interfere too much with that, and you create problems.
It’s not an easy thing to regulate.
Definitely for One Job One Salary. Otherwise bias and friendship dominate. Managers may say they pay on performance and they may actually believe it, but bias holds sway. Gender, Orientation, Race, Ethnicity, Politics, Age, Religion, they all affect your pay when it is determined subjectively. This is why teacher’s unions oppose pay for performance, which sounds nice but really means your Principal controls your pay and can reward sycophants and punish opponents.
Just looked at wikipedia.
That is a garbage statistic. Yes, Engineering (male dominated) pays more than maid service (female dominated). You have to compare apples with oranges. That sort of legislation just divides the electorate. Laws must be fair to ALL, not reverse discrimination. A statistical approach will not work. One Job One salary. EVERY job listing should state the pay. No negotiation except for special talent like baseball players, recording artists, and actors. If you are better qualified, you get the job, not more money. The job is worth what it’s worth.
For new hires, that’s fine.
But what about raises?
What’s my incentive to go the extra mile for my company if I’m getting the same raise as my slacking co-worker?
The slacker should be fired.
Like that ever happens.
Our corporations carry so much dead weight on their hands it’s ridiculous. What they do is, they carry all the slackers as long as they can because they hate firing people, and they hate interviewing people and turning them down so they hate creating open positions. Then, when the economy turns south, they round up all the deadweight and let them go all at once. When it’s really bad, they let go of productive workers, too, because their contracts have dried up.
I’ve never worked anywhere where I didn’t see this pattern.
And I always see terrible slackers and unqualified hacks get hired in the first place because no one wants to do another round of interviews.
Also, even slackers are cheaper to maintain than hiring and training new people.
Up to a point. Depends on their billable rate and if they screw up your ability to deliver or your client relationships.
That’s how the good companies operate.
I do have to admit, Boo, that in the government it’s different. There the slackers are just put in a corner so they don’t get in the way of the working people. I’m sure you’ll ask, “So why does anyone in the government work?” The answer is pride and/or belief in the mission. Believe it or not, these do exist.
That’s not true at all, many larger companies hold on to people that aren’t great for many reasons from cost of new hiring training to fear of lawsuits, even if they would probably win.
Well, Jim, I’ve named the companies that I worked for. What are yours?
I forgot to put the clarifier, definitely not the only reason but a big one.
It’s rarely that simple, especially for larger companies.
Well, I’ve worked for International Harvester and TRW, and Continental Can and it was true there with the caveat that the slacker was not related to a manager or sleeping with one.
It was definitely true at the smaller companies I worked for.
And no one hated interviewing. It was an excuse to take candidates to lunch on the expense account. Even when you were positive they would not be hired, it was off for a steak and a couple of drinks on the company. Except for one unsufferable asshole from MIT that impressed the managers with his degree. We took him to Denny’s, no booze. “Because that was all he deserved”, direct quote from the Senior Software Engineer (U of I, Champaign). I went along for the free lunch and the chance to throw a few barbs into the Massachusetts Institute of Snobbery.
my answer to this is the same as I gave above
There is a whole section of economic theory about what price discrimination does to a market. And what goes on clearly is price discrimination based on gender. And more than that if you’ve ever sat in on a meeting of managers in which there were no women present. Especially after a mandatory “diversity training” class.
The explanation based on salary negotiations assumes that there are such things as salary negotiations to begin with. And it essentially says that women get lower pay because they expect to get lower pay.
There is no real market for labor. As a result there is no real benchmark for comparisons of compensation. In addition, there is not effective means of accounting for the contribution of labor (or any other factor) individually to the value, sales price, or profit from a sale of goods or services. What remains to be negotiated is constrained by real economic realities, phony budget realities, and the relative information available between the parties to the negotiation and the relative power (economic or institutional) between the folks negotiating. And folks who are discriminated against for any job in a field will easily bargain between a lower paid job in that field and no job at all.
All of the bureaucratic ways of defining the value (and thus the reasonable salary) for work — standard occupational definitions, formal pay grades and scales, etc. — have failed. The end runs of these procedures are legendary as are the complaints about their flexibility.
The job might have one price, but who sets that price and on what basis? Market economics assumes that negotiation discovers that one price at equilibrium, but there is too much of the visible hand in the way markets work.
We are at a point in the economy that we need to start discussing the fundamental role of work and consumption in the economy. And whether the linkage between the two still is as strong.
Finally, most workers are not college grads. That likely will continue to be the case. And wage discrimination by gender and occupation is more pronounced in the opportunities available to folks who are not college grads.
There is a lot of “settling for less” going on in the economy.
I don’t know.
Take any two people and put them in a Turkish bazaar. Tell them to go buy a rug.
They’ll come back having paid a different price for the rug. What determined the price they paid?
It was a complex amalgam of their individual personalities and the personalities of the people who sold them the rug. Did one get an easier negotiator? Did one have a more timid personality?
When you essentially try to do the same thing by gender, you have to add the possibility that the rug-sellers are more comfortable driving a hard bargain with a woman than with a man.
And then you have to add the possibility that they know that women are statistically more likely to give in to hard bargaining, so they give them rougher treatment quite consciously.
Now, if you were to decide that this problem of women getting ripped off at Turkish bazaars was real and something ought to be done about it, how do you tackle it? And how does that translate to the workplace?
I think the Paycheck Fairness Act goes about it in a variety of ways. I believe there is actually money in there to help women learn to be better negotiators, for example. I don’t know how that would work, but it does at least acknowledge that the problem is complicated.
As for theories of labor value, we don’t need that. The government doesn’t need to set prices for labor. Companies can set the price, but they might have to publicize a firm offer, at least in certain classes of employment.
If companies set the price of labor, how do they go about setting it?
The problem is that the labor market does not consist of market relationships. There is no Turkish bazaar. The “labor market” is fundamentally an aggregation of patronage relationship in which one trades work and obedience (and loss of some Constitutional rights) for economic security.
The government currently does set prices for labor. Consider the proportion of the workforce that the minimum wage applies to and for whom that is the permanent maximum wage as well.
Consider that the government used to have strict rules for the payment of overtime for work over 40 hours a week. A new New Deal could probably make that 20 hours a week and enforce double time instead of time-and-a-half and get the economy moving again.
If labor-saving capital investment is displacing workers, then the time workers need in order to earn the same living should be dropping.
I’m not knocking the Paycheck Fairness Act. I’m pointing out that our economic situation requires more global, more signficant, and more innovative approaches.
If business won’t do it and government doesn’t need to do it, maybe culture can do it. All men should drop out of the work force and stay home. That would raise wages and salaries for women. You know that cultural strategy has been done before.
“All men should drop out of the work force and stay home.”
!! That worked to raise women’s wages in WWII, though the men didn’t get to stay home.
Agreed that the government sets soe broad pay parameters like minimum wage, but trying to set and enforce labor rates for every job would be a nightmare.
Even in my own fairly open system, where everyone’s salary is a matter of public record (the UC system), and where detailed pay scales are set from on high, there
are still large disparities in pay. Some people are better at manipulating the system, some are just better at their jobs. So they get “pay bumps” (called going off-scale here), or they get extra “summer salary”, things like that. Don’t know how women do compared to men here, it would be interesting to see some data on that. Anyway, I guess I don’t see how one can legislate away these disparities, or even if one should, given the complexities faced by employers and employees in determining fair wages.
It’s called the budget, Tarheel.
A company gets a new contract with Dow Chemical for $3 million in business over the next fiscal year. They need two new hires to meet the contract requirements. They figure they can afford to spend roughly $250,000, but they’d rather pay less. Then people start coming in the door applying for the job. Some are getting paid $150,000 in their current job, others are getting paid $80,000, still others don’t have a job at all. And then those applicants provide you with their expected salary, which may be above your budget or below.
If you are willing to pay one applicant more than half of your budgeted salary because you really like them, then you have to pay the second person less out of necessity.
You can quickly see how meddlesome it would be to try to set firm prices.
I believe that was my point in asking how corporations would do this – the meddlesomeness of fixed prices. Because corporations pretend to do this through HR department job, pay, and grade guidelines that are routinely ignored.
Still, most businesses don’t operate on single million-dollar transactions. They operate on flows of much smaller transactions. Budgeting is based more on estimates of future business than on known contracts. Guess how that works out.
And, if it is based on whether the hiring party really likes them, it is a patronage relationship, not a market one.
I think that patronage comment is baloney.
You interview a bunch of people and someone really strikes you as better than the rest. You want that guy or gal, and you’re willing to pay a premium to get them. That’s not patronage. That’s life.
It might be life, but it ain’t a market.
So, when I go to the hardware store to buy a product and I choose a slightly more expensive than necessary tool because I think it will work more efficiently for me, I am not making a market decision? I’m paying more for what I perceive to be greater value, even though I could get the job done for less.
If you are objecting that the tool is a human being who gets to negotiate its own price, that’s never going to be better than an awkward analogy. You’ll always need some kind of third party to arbitrate that, the the customer is in some sense always right because there’s a real point at which hiring you is not profitable.
I don’t buy a rake if it’s cheaper to hire a landscaper. And maybe I don’t really give a crap about my lawn anyway, if it’s going to be such a hassle.
Unless you are working for yourself, you are always involved in a equation of utility. There must be enough demand for your work and you must do your work in a way that creates profit. That’s why unions frequently consent to reworking agreements with management.
Yep, you are always involved in an equation of utility. But your utility is not that which is valuable to the corporation or the customers of the corporation, it is that which is valuable to the person hiring. That is not a market relationship; that is a patronage relationship.
As long as that patronage relationship exists, the economy can go to hell and you can work in a way that reduces profit and creates losses and you will still be paid until the business (not the hiring person) goes broke or the hiring person (and you) are fired.
Jamie Dimon is a superb example of the fact that labor is not contracted as market transactions but as patronage transactions.
Markets should be information systems that efficiently reflect back supply-and-demand balances under conditions of factor constraints. And do that more effectively than bureaucratic information systems. The way that labor is contracted in the US does not do that. That is not to say that a bureaucratic system would be better; civil service systems show that it is not. That is why I continue to say that we need to have a fundamental conversation about this instead of harking back to Econ 101 concepts or even a good labor economics course.
The system is not functioning as folks expect. That is a problem.
It is interesting that in your formulation, the perspective is from that of the employer alone. And from a single transaction alone.
We need this law as a means to leverage our demand for equal pay. Since there is no labor market the enforcement is only possible through union action so changing laws making unions possible is just as important. Once this starts then the companies will do it on their own if nothing more than to keep unions out. This influence of unions is what raised wages for everyone creating the middle class so many years ago.
IMO, having union negotiations instead of an individual one makes the labor market more of a market; folks had “union scale” as a benchmark. But even within the union, there is the decision about who gets what scale and who gets sent on which contracts and who gets into the union. There are a heap of fairness issues in the way all of those decisions are made.
I agree that the only way a labor market could exist is through labor negotiations but this law would not only give the negotiators leverage with the company but would also set a standard for the labor negotiators themselves. I also think with union membership down they would welcome women members
We’re on the same page with regard to the legislation. It’s just that there is a more fundamental conversation about economic and employment policy that we need to be having in this country.
Everywhere there is work to do and workers able to do it but the “market” just can’t seem to get the two together. That runs counter to conventional economic theory.
The (labor) market cannot get work that needs done paired with workers because there is no labor market. The unions have been devastated since Reagan and now they’re trying to get rid of public sector unions. With the economy in a demand stall, things will just get worse. We need companies to pay the social cost for outsourcing plus create tax incentives (not tax breaks) for them to invest back into domestic growth. When the top tax rate was 90% you either invested the money you made or you lost it to taxes. Now all that may be possible is for the government to stimulate demand as Paul Krugman suggests. We need to control congress without the blue dogs or the filibuster.
I remember Continental Can Company and a programmer we hired there in the early ’80s. She was a real looker and the commentry revolved around that. She was hired and I was assigned to be her mentor. She was bright, hardworking, friendly, sociable and learned everything new that I gave her to do with minimal direction and explanation. I would hire her in a shot if my money was paying her salary. They
let her gono, damn it, they FIRED her, brutally, despite my protests, because she “wasn’t aggressive enough”, i.e. wasn’t male.That’s not really an argument I’ve heard recently. It’s not been about what might happen but what has actually happened. That those statistics don’t take into account the time actually spent away from careers to take care of children or elderly parents. That total experience is generally lower among women and that explains the pay discrepancy.
I don’t buy that, because first I think the statistics take that into account. Second, it’s pretty common these days for men to stay home themselves. Thirdly, for a lot of women in the workplace they can’t afford to stay out even for the FMLA minimum available. So I don’t think this experience “argument” has any merit.
It’s more like, “Why am I going to hire and train this person if she’s just going to get married, have kids, and quit?” Or, “why should I hire a woman when there’s a high likelihood that she’ll get pregnant and miss a bunch of work?”
Even if you allow that kind of thinking, it doesn’t make a very compelling justification for wage discrimination if you do hire her. If she’s there and training and doing the work, you can’t treat her unequally because some hypothetical statistical likelihood that she’ll quit or miss work.
I had an interesting experience working in a sales and design job. The owners gave same base pay to everyone, whether you were the janitor, truck driver or top sales person.
Every Friday the sales of each person were posted for all to see. A commission was paid on every sale and that commission was split with the infrastructure group (truck drivers, bookkeepers, etc)
Screw ups & returns were deducted from the commission and were also posted. Whether the return was on the account of our customer known as ‘Randy return’ or a truck driver dropping material, or a salesperson misquoting, whatever the reason, it was always factored in.
As you can imagine, the daylight of the figures encouraged everyone to watch out for errors and work toward a successful team. At the end of the year, the group that had the least errors, most sales produced got a bonus, which again was posted for all to see.
I like it – but then I’ve got commie tendencies. It’s the transparency that creates fairness and gets people working together.
Could follow the GS scale like the government does…or something similar.